on this chart is 780.40. When the price fell below this swing low, it signaled
a sell entry. Some traders would just place a stop order to enter at 780.30 in
this case. The maximum risk would be defined as above the high made
prior to the reversal signal. In this case, a stop could be placed just a tick or
two above the 782.00 swing high. This risk might be too high for many
short-term traders. There are a couple of other options to minimize the risk.
As far as reducing your risk against the original trade setup, there are
actually three things you can do.